bwen20240331

bwen20240331_10q.htm

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-34278

BROADWIND, INC.

(Exact name of registrant as specified in its charter)

Delaware		88-0409160
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3240 S. Central Avenue, Cicero, IL 60804

(Address of principal executive offices)

(708) 780-4800

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.001 par value	BWEN	The NASDAQ Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding twelve months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer ☐		Accelerated filer ☐

Non-accelerated filer ☒		Smaller reporting company ☒

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period to comply with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of shares of registrant’s common stock, par value $0.001, outstanding as of May 9, 2024: 21,733,679.

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BROADWIND, INC. AND SUBSIDIARIES

INDEX

		Page No.

PART I. FINANCIAL INFORMATION

Item 1.	Unaudited Financial Statements	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Stockholders’ Equity	3
	Condensed Consolidated Statements of Cash Flows	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4.	Controls and Procedures	23
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	24
Item 1A.	Risk Factors	24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24
Item 3.	Defaults Upon Senior Securities	24
Item 4.	Mine Safety Disclosures	24
Item 5.	Other Information	24
Item 6.	Exhibits	24
Signatures		26

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PART I. FINANCIAL INFORMATION

Item 1.Financial Statements

BROADWIND, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share and per share data)

	*March 31,*			*December 31,*
	*2024*			*2023*

ASSETS
CURRENT ASSETS:
Cash	$	1,073		$	1,099
Accounts receivable, net		14,601			19,231
AMP credit receivable		1,732			7,051
Contract assets		660			1,460
Inventories		37,386			37,405
Prepaid expenses and other current assets		2,829			3,500
Total current assets		58,281			69,746
LONG-TERM ASSETS:
Property and equipment, net		47,137			47,123
Operating lease right-of-use assets, net		15,159			15,593
Intangible assets, net		1,899			2,064
Other assets		595			630
TOTAL ASSETS	$	123,071		$	135,156
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Line of credit and current maturities of long-term debt	$	1,428		$	5,903
Current portion of finance lease obligations		2,205			2,153
Current portion of operating lease obligations		1,914			1,851
Accounts payable		16,298			20,728
Accrued liabilities		6,406			6,477
Customer deposits		11,403			16,500
Total current liabilities		39,654			53,612
LONG-TERM LIABILITIES:
Long-term debt, net of current maturities		6,262			6,250
Long-term finance lease obligations, net of current portion		3,733			3,372
Long-term operating lease obligations, net of current portion		15,374			15,888
Other		7			15
Total long-term liabilities		25,376			25,525
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY:
Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued or outstanding		—			—
Common stock, $0.001 par value; 30,000,000 shares authorized; 21,947,606 and 21,840,301 shares issued as of March 31, 2024, and December 31, 2023, respectively		22			22
Treasury stock, at cost, 273,937 shares as of March 31, 2024 and December 31, 2023		(1,842	)		(1,842	)
Additional paid-in capital		399,848			399,336
Accumulated deficit		(339,987	)		(341,497	)
Total stockholders’ equity		58,041			56,019
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	123,071		$	135,156

The accompanying notes are an integral part of these condensed consolidated financial statements.

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BROADWIND, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands, except per share data)

	*Three Months Ended March 31,*
	*2024*			*2023*
Revenues	$	37,616		$	48,873
Cost of sales		30,979			41,897
Gross profit		6,637			6,976
OPERATING EXPENSES:
Selling, general and administrative		4,394			5,526
Intangible amortization		165			168
Total operating expenses		4,559			5,694
Operating income		2,078			1,282
OTHER EXPENSE, net:
Interest expense, net		(532	)		(488	)
Other, net		3			(2	)
Total other expense, net		(529	)		(490	)
Net income before provision for income taxes		1,549			792
Provision for income taxes		39			23
NET INCOME		1,510			769
NET INCOME PER COMMON SHARE—BASIC:
Net income	$	0.07		$	0.04
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING—BASIC		21,595			20,869
NET INCOME PER COMMON SHARE—DILUTED:
Net income	$	0.07		$	0.04
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING—DILUTED		21,807			21,387

The accompanying notes are an integral part of these condensed consolidated financial statements.

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BROADWIND, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

(in thousands, except share data)

	*Common Stock*				*Treasury Stock*						*Additional*
	*Shares*		*Issued*					*Issued*			*Paid-in*		*Accumulated*
	*Issued*		*Amount*		*Shares*			*Amount*			*Capital*		*Deficit*			*Total*

BALANCE, December 31, 2022		21,127,130	$	21		(273,937	)	$	(1,842	)	$	397,240	$	(349,146	)	$	46,273
Stock issued under defined contribution 401(k) retirement savings plan		64,807		—		—			—			302		—			302
Share-based compensation		—		—		—			—			178		—			178
Net income		—		—		—			—			—		769			769
BALANCE, March 31, 2023		21,191,937	$	21		(273,937	)	$	(1,842	)	$	397,720	$	(348,377	)	$	47,522

BALANCE, December 31, 2023		21,840,301	$	22		(273,937	)	$	(1,842	)	$	399,336	$	(341,497	)	$	56,019
Stock issued under defined contribution 401(k) retirement savings plan		107,305		—		—			—			287		—			287
Share-based compensation		—		—		—			—			225		—			225
Net income		—		—		—			—			—		1,510			1,510
BALANCE, March 31, 2024		21,947,606	$	22		(273,937	)	$	(1,842	)	$	399,848	$	(339,987	)	$	58,041

The accompanying notes are an integral part of these condensed consolidated financial statements.

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BROADWIND, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

	*Three Months Ended March 31,*
	*2024*			*2023*
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	1,510		$	769
Adjustments to reconcile net cash provided by (used in) operating activities:
Depreciation and amortization expense		1,596			1,605
Deferred income taxes		(8	)		(5	)
Stock-based compensation		225			178
Allowance for doubtful accounts		(2	)		14
Common stock issued under defined contribution 401(k) plan		287			302
Changes in operating assets and liabilities:
Accounts receivable		4,632			(8,841	)
AMP credit receivable		5,319			(3,162	)
Contract assets		800			46
Inventories		19			(4,281	)
Prepaid expenses and other current assets		635			130
Accounts payable		(4,005	)		(784	)
Accrued liabilities		(71	)		847
Customer deposits		(5,097	)		(12,799	)
Other non-current assets and liabilities		17			(3	)
Net cash provided by (used in) operating activities		5,857			(25,984	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(1,744	)		(1,065	)
Net cash used in investing activities		(1,744	)		(1,065	)
CASH FLOWS FROM FINANCING ACTIVITIES:
(Payments on) proceeds from line of credit, net		(4,657	)		16,945
Proceeds from long-term debt		1,244			—
Payments on long-term debt		(325	)		(634	)
Principal payments on finance leases		(401	)		(265	)
Net cash (used in) provided by financing activities		(4,139	)		16,046
NET DECREASE IN CASH		(26	)		(11,003	)
CASH beginning of the period		1,099			12,732
CASH end of the period	$	1,073		$	1,729

The accompanying notes are an integral part of these condensed consolidated financial statements.

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BROADWIND, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(Dollars are presented in thousands, except share, per share and per employee data or unless otherwise stated)

NOTE 1 — BASIS OF PRESENTATION

The unaudited condensed consolidated financial statements presented herein include the accounts of Broadwind, Inc. (the “Company”) and its wholly-owned subsidiaries Broadwind Heavy Fabrications, Inc. (“Broadwind Heavy Fabrications”), Brad Foote Gear Works, Inc. (“Brad Foote”) and Broadwind Industrial Solutions, LLC (“Broadwind Industrial Solutions”). All intercompany transactions and balances have been eliminated. The financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the financial statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments, including normal recurring accruals, considered necessary for a fair presentation have been included.

Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the twelve months ending December 31, 2024, or any other interim period, which may differ materially due to, among other things, the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2023.

The December 31, 2023 condensed consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by GAAP. This financial information should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

There have been no material changes in the Company’s significant accounting policies during the three months ended March 31, 2024 as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Company Description

Through its subsidiaries, the Company is a precision manufacturer of structures, equipment and components for clean technology and other specialized applications. The Company provides technologically advanced high value products to customers with complex systems and stringent quality standards that operate in energy, mining and infrastructure sectors, primarily in the United States of America (the “U.S.”). The Company’s capabilities include, but are not limited to the following: heavy fabrications, welding, metal rolling, coatings, gear cutting and shaping, gearbox manufacturing and repair, heat treatment, assembly, engineering and packaging solutions. The Company’s most significant presence is within the U.S. wind energy industry, which accounted for 39% and 50% of the Company’s revenue during the first three months of 2024 and 2023, respectively.

Liquidity

The Company typically meets its short term liquidity needs through cash generated from operations, its available cash balances, the 2022 Credit Facility (as defined below), equipment financing, and access to the public and private debt and/or equity markets, and has the option to raise capital from the sale of the Company’s securities under the Company’s registration statement on Form S-3 (as discussed below), and proceeds from sales of Advanced Manufacturing Production tax credits (“AMP credits”) (discussed in Note 5 “AMP Credits” of these condensed consolidated financial statements).

See Note 8, “Debt and Credit Agreements,” of these condensed consolidated financial statements for a description of the 2022 Credit Facility and the Company’s other debt.

Debt and finance lease obligations at March 31, 2024 totaled $13,628, which includes current outstanding debt and finance leases totaling $3,633. The Company’s outstanding debt includes $5,864 outstanding from the senior secured term loan under the 2022 Credit Facility. During the three months ended March 31, 2024, the Company borrowed on the revolving line of credit and repaid such borrowings during the quarter. The Company had no amounts drawn on the revolving line of credit as of March 31, 2024. The Company’s revolving line of credit balance, if any, is included in the “Line of credit and current maturities of long-term debt” line item in the Company's condensed consolidated balance sheet.

On September 22, 2023, the Company filed a shelf registration statement on Form S-3, which was declared effective by the Securities and Exchange Commission (the “SEC”) on October 12, 2023 (the “Form S-3”), replacing a prior shelf registration statement which expired on October 12, 2023. This shelf registration statement, which includes a base prospectus, allows the Company to offer any combination of securities described in the prospectus in one or more offerings. Unless otherwise specified in the prospectus supplement accompanying the base prospectus, the Company would use the net proceeds from the sale of any securities offered pursuant to the shelf registration statement for general corporate purposes.

On September 12, 2022, the Company entered into a Sales Agreement (the “Sales Agreement”) with Roth Capital Partners, LLC and HC Wainwright & Co., LLC (collectively, the “Agents”). Pursuant to the terms of the Sales Agreement, the Company may sell from time to time through the Agents shares of the Company’s common stock, par value $0.001 per share with an aggregate sales price of up to $12,000. The Company will pay a commission to the Agents of 2.75% of the gross proceeds of the sale of the shares sold under the Sales Agreement and reimburse the Agents for the expenses incident to the performance of their obligations under the Sales Agreement. During the year ended December 31, 2022, the Company issued 100,379 shares of the Company’s common stock under the Sales Agreement and the net proceeds (before upfront costs) to the Company from the sale of the Company’s common stock were approximately $323 after deducting commissions paid of approximately $9 and before deducting other expenses of $93. No shares of the Company’s common stock were issued under the Sales Agreement during the year ended December 31, 2023 or during the three months ended March 31, 2024. As of March 31, 2024, shares of the Company’s common stock having a value of approximately $11,667 remained available for issuance under the Sales Agreement. Any additional shares offered and sold under the Sales Agreement are to be issued pursuant to the Form S-3 and a 424(b) prospectus supplement.

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The Company also utilizes supply chain financing arrangements as a component of its funding for working capital, which accelerates receivable collections and helps to better manage cash flow. Under these agreements, the Company has agreed to sell certain of its accounts receivable balances to banking institutions who have agreed to advance amounts equal to the net accounts receivable balances due, less a discount as set forth in the respective agreements. The balances under these agreements are accounted for as sales of accounts receivable, as they are sold without recourse. Cash proceeds from these agreements are reflected as operating activities included in the change in accounts receivable in the Company's consolidated statements of cash flows. Fees incurred in connection with the agreements are recorded as interest expense by the Company.

During the three months ended March 31, 2024 and March 31, 2023, the Company sold account receivables totaling $6,805 and $9,614, respectively, related to supply chain financing arrangements, of which customers’ financial institutions applied discount fees totaling $164 and $131, respectively.

In January 2023, the Company announced that it had entered into a supply agreement for wind tower purchases valued at approximately $175 million with a leading global wind turbine manufacturer. Under the terms of the supply agreement, order fulfillment is to occur beginning in 2023 through year-end 2024. In early November 2023, the parties discussed their joint intent to shift approximately half of the contracted tower section orders initially planned for 2024 into 2025, while maintaining the total number of tower sections stipulated under the supply agreement.

The Company anticipates that current cash resources, amounts available under the 2022 Credit Facility, sales of shares under the Sales Agreement, cash to be generated from operations and equipment financing, access to the public and private debt and/or equity markets, any potential proceeds from the sale of further Company securities under the Form S-3, and proceeds from sales of AMP credits will be adequate to meet the Company’s liquidity needs for at least the next twelve months.

If assumptions regarding the Company’s production, sales and subsequent collections from certain of the Company’s large customers, the Company’s ability to finalize the terms of the remaining obligations under a supply agreement with a leading global wind turbine manufacturer, as well as receipt of customer deposits and revenues generated from new customer orders, are materially inconsistent with management’s expectations, the Company may in the future encounter cash flow and liquidity issues.

If the Company’s operational performance deteriorates, the Company may be unable to comply with existing financial covenants, and could lose access to the 2022 Credit Facility. This could limit the Company’s operational flexibility, require a delay in making planned investments and/or require us to seek additional equity or debt financing. Any attempt to raise equity through the public markets could have a negative effect on the Company’s stock price, making an equity raise more difficult or more dilutive. Any additional equity financing or equity-linked financing, if available, will be dilutive to stockholders, and additional debt financing, if available, would likely require new financial covenants or impose other operating and financial restrictions on the Company. While management believes that the Company will continue to have sufficient cash available to operate its businesses and to meet the Company’s financial obligations and debt covenants, there can be no assurances that the Company’s operations will generate sufficient cash, or that credit facilities or equity or equity-linked financings will be available in an amount sufficient to enable the Company to meet these financial obligations.

Reclassifications

Certain prior year amounts have been reclassified to conform to current year presentation in the condensed consolidated financial statements and the notes to the condensed consolidated financial statements.

Management’s Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities as of the date of the financial statements and reported amounts of revenues and expenses during the reported period. Significant estimates, among others, include inventory reserves, warranty reserves, impairment of long-lived assets, allowance for doubtful accounts, health insurance reserves, and valuation allowances on deferred taxes. Although these estimates are based upon management’s best knowledge of current events and actions that the Company may undertake in the future, actual results could differ from these estimates.

NOTE 2 — REVENUES

Revenues are recognized when the promised goods or services are transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.

The following table presents the Company’s revenues disaggregated by revenue source for the three months ended March 31, 2024 and 2023:

	*Three Months Ended March 31,*
	*2024*			*2023*
Heavy Fabrications	$	22,016		$	31,593
Gearing		8,337			11,965
Industrial Solutions		7,994			5,423
Eliminations		(731	)		(108	)
Consolidated	$	37,616		$	48,873

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Revenue within the Company’s Gearing and Industrial Solutions segments, as well as industrial fabrication product line revenues within the Heavy Fabrications segment, are generally recognized at a point in time, typically when the promised goods or services are physically transferred to its customers in an amount that reflects the consideration it expects to be entitled to in exchange for those goods or services. A performance obligation is a promise in a contract to transfer a distinct product or service to the customer. The Company measures revenue based on the consideration specified in the purchase order and revenue is recognized when the performance obligations are satisfied. If applicable, the transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as the customer receives the benefit of the performance obligation.

For many tower sales within the Company’s Heavy Fabrications segment, products are sold under terms included in bill and hold sales arrangements that result in different timing for revenue recognition. The Company recognizes revenue under these arrangements only when there is a substantive reason for the agreement, the ordered goods are identified separately as belonging to the customer and not available to fill other orders, the goods are currently ready for physical transfer to the customer, and the Company does not have the ability to use the product or to direct it to another customer. Assuming these required revenue recognition criteria are met, revenue is recognized upon completion of product manufacture and customer acceptance.

During the three months ended March 31, 2024 and 2023, the Company recognized a portion of revenue within the Heavy Fabrications segment over time, as the products had no alternative use to the Company and the Company had an enforceable right to payment, including profit, upon termination of the contracts. Within the Heavy Fabrications segment, the Company recognized revenue for contracts that meet over time criteria of $280 and $3,669 for the three months ended March 31, 2024 and March 31, 2023, respectively. The Company uses labor hours as the input measure of progress for the applicable Heavy Fabrications contracts because the projects are labor intensive. Contract assets are recorded when performance obligations are satisfied but the Company is not yet entitled to payment. Contract assets represent the Company’s rights to consideration for work completed but not billed at the end of the period.

The Company generally expenses sales commissions when incurred. These costs are recorded within selling, general and administrative expenses. Customer deposits, deferred revenue and other receipts are deferred and recognized when the revenue is realized and earned. Cash payments to customers are classified as reductions of revenue in the Company’s statement of operations.

The Company does not disclose the value of the unsatisfied performance obligations for contracts with an original expected length of one year or less.

NOTE 3 — EARNINGS PER SHARE

The following table presents a reconciliation of basic and diluted earnings per share for the three months ended March 31, 2024 and 2023, as follows:

	*Three Months Ended*
	*March 31,*
	*2024*		*2023*
Basic earnings per share calculation:
Net income	$	1,510	$	769
Weighted average number of common shares outstanding		21,594,664		20,869,035
Basic net income per share	$	0.07	$	0.04
Diluted earnings per share calculation:
Net income	$	1,510	$	769
Weighted average number of common shares outstanding		21,594,664		20,869,035
Common stock equivalents:
Non-vested stock awards		212,118		517,979
Weighted average number of common shares outstanding		21,806,782		21,387,014
Diluted net income per share	$	0.07	$	0.04

NOTE 4 — INVENTORIES

The components of inventories as of March 31, 2024 and December 31, 2023 are summarized as follows:

	*March 31,*			*December 31,*
	*2024*			*2023*
Raw materials	$	21,381		$	24,651
Work-in-process		14,138			10,390
Finished goods		4,109			4,595
		39,628			39,636
Less: Reserve		(2,242	)		(2,231	)
Net inventories	$	37,386		$	37,405

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NOTE 5 — AMP CREDITS

During the three months ended March 31, 2024 and March 31, 2023, the Company recognized gross AMP credits totaling $1,872 and $3,162, respectively, within the Heavy Fabrications segment. These AMP credits were introduced as part of the IRA, which was enacted on August 16, 2022. The Inflation Reduction Act (“IRA”) includes advanced manufacturing tax credits for manufacturers of eligible components, including wind components. Manufacturers of wind components qualify for the AMP credits based on the total rated capacity, expressed on a per watt basis, of the completed wind turbine for which such component is designed. The credit applies to each component produced and sold in the U.S. beginning in 2023 through 2032. Wind towers within the Company’s Heavy Fabrications segment are eligible for credits of $0.03 per watt for each wind tower produced. In calculating the eligible credit, the Company relied on the megawatt rating provided by the customers. Manufacturers who qualify for the AMP credits can apply to the Internal Revenue Service for cash refunds of the AMP credits, sell the AMP credits to third parties for cash, or apply the AMP credits against taxable income. The Company recognized the AMP credits as a reduction to cost of sales in the Company’s condensed consolidated statements of operations for the three months ended March 31, 2024 and March 31, 2023. The assets related to the AMP credits are recognized as current assets in the “AMP credit receivable” line item in the Company’s condensed consolidated balance sheet as of March 31, 2024 and December 31, 2023.

On December 21, 2023, the Company entered into an agreement to sell 2023 and 2024 AMP credits to a third party. At that time, the Company sold a portion of the gross 2023 credits in the amount of $6,952 and recognized a 6.5% discount on the sale in the amount of $452 which was recognized in cost of sales. In addition, the Company wrote down the remaining receivable of $7,541 to net realizable value and recorded the expected loss on sale of $490 in cost of sales. The remaining 2023 AMP credit receivable was collected during the first quarter of 2024. The Company also incurred other miscellaneous administrative costs related to selling the credits in the amount of $254, $197 of which has been recorded as cost of sales, with the remaining capitalized and included in the “Prepaid expenses and other current assets” line item of the Company’s condensed consolidated financial statements at December 31, 2023.

During the three months ended March 31, 2024, the Company recognized gross AMP credits totaling $1,872 and recognized a 6.5% discount on the credits totaling $122, which was recognized in cost of sales. The Company also incurred other miscellaneous administrative costs related to the credits in the amount of $33, which have been recorded as cost of sales. Additionally, costs totaling $42 are included in the “Prepaid expenses and other current assets” line item of the Company’s condensed consolidated financial statements at March 31, 2024.

NOTE 6 — INTANGIBLE ASSETS

Intangible assets represent the fair value assigned to definite-lived assets such as trade names and customer relationships as part of the Company’s acquisition of Brad Foote completed in 2007 as well as the noncompetition agreements, trade names and customer relationships that were part of the Company’s acquisition of Red Wolf Company, LLC completed in 2017. Intangible assets are amortized on a straight-line basis over their estimated useful lives, with a remaining life range from 2 to 4 years.

As of March 31, 2024 and December 31, 2023, the cost basis, accumulated amortization and net book value of intangible assets were as follows:

	*March 31, 2024*												*December 31, 2023*
											*Remaining*												*Remaining*
											*Weighted*												*Weighted*
						*Accumulated*			*Net*		*Average*							*Accumulated*			*Net*		*Average*
	*Cost*		*Accumulated*			*Impairment*			*Book*		*Amortization*				*Accumulated*			*Impairment*			*Book*		*Amortization*
	*Basis*		*Amortization*			*Charges*			*Value*		*Period*		*Cost*		*Amortization*			*Charges*			*Value*		*Period*
Intangible assets:
Noncompete agreements	$	170	$	(170	)	$	—		$	—		—	$	170	$	(170	)	$	—		$	—		—
Customer relationships		15,979		(7,907	)		(7,592	)		480		1.8		15,979		(7,842	)		(7,592	)		545		2.1
Trade names		9,099		(7,680	)		—			1,419		3.5		9,099		(7,580	)		—			1,519		3.8
Intangible assets	$	25,248	$	(15,757	)	$	(7,592	)	$	1,899		3.1	$	25,248	$	(15,592	)	$	(7,592	)	$	2,064		3.3

As of March 31, 2024, estimated future amortization expense was as follows:

2024	$	496
2025		661
2026		422
2027		320
Total	$	1,899

NOTE 7 — ACCRUED LIABILITIES

Accrued liabilities as of March 31, 2024 and December 31, 2023 consisted of the following:

	*March 31,*		*December 31,*
	*2024*		*2023*
Accrued payroll and benefits	$	5,187	$	5,051
Accrued property taxes		206		—
Income taxes payable		302		254
Accrued professional fees		96		140
Accrued warranty liability		255		322
Self-insured workers compensation reserve		52		21
Accrued sales tax		107		310
Accrued other		201		379
Total accrued liabilities	$	6,406	$	6,477

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NOTE 8 — DEBT AND CREDIT AGREEMENTS

The Company’s outstanding debt balances as of March 31, 2024 and December 31, 2023 consisted of the following:

	*March 31,*			*December 31,*
	*2024*			*2023*
Line of credit	$	—		$	4,657
Other notes payable		1,826			1,361
Long-term debt		5,864			6,135
Total debt		7,690			12,153
Less: current maturities		(1,428	)		(5,903	)
Long-term debt, net of current maturities	$	6,262		$	6,250

Credit Facility

On August 4, 2022, the Company entered into a credit agreement (the “2022 Credit Agreement”) with Wells Fargo which replaced its prior credit facility and provided the Company and its subsidiaries with a $35,000 senior secured revolving credit facility (which may be further increased by up to an additional $10,000 upon the request of the Company and at the sole discretion of Wells Fargo) and a $7,578 senior secured term loan (collectively, the “2022 Credit Facility”). The proceeds of the 2022 Credit Facility are available for general corporate purposes, including strategic growth opportunities. Deferred financing costs related to the 2022 Credit Facility were $333 primarily related to the revolving credit loan, which is net of accumulated amortization of $167, at March 31, 2024. Deferred financing costs related to the 2022 Credit Facility were $359 which is net of accumulated amortization of $141, at December 31, 2023. These costs are included in the “Other assets” line item of the Company's condensed consolidated financial statements at March 31, 2024 and December 31, 2023.

On February 8, 2023, the Company executed Amendment No. 1 to Credit Agreement and Limited Waiver which waived the Company’s fourth quarter minimum EBITDA (as defined in the 2022 Credit Agreement) requirement for the period ended December 31, 2022, amended the Fixed Charge Coverage Ratio (as defined in the 2022 Credit Agreement) requirements for the twelve-month period ending January 31, 2024 through and including June 30, 2024 and each twelve-month period thereafter, and amended the minimum EBITDA requirements applicable to the twelve-month periods ending March 31, 2023, June 30, 2023, September 30, 2023, and December 31, 2023.

The 2022 Credit Agreement, as amended, contains customary covenants limiting the Company’s and its subsidiaries’ ability to, among other things, incur liens, make investments, incur indebtedness, merge or consolidate with others or dispose of assets, change the nature of its business, and enter into transactions with affiliates. The initial term of the revolving credit facility matures August 4, 2027. The term loan also matures on August 4, 2027, with monthly payments based on an 84-month amortization.

As of March 31, 2024, there was $5,864 of outstanding indebtedness under the 2022 Credit Facility, with the ability to borrow an additional $21,326. As of March 31, 2024, the Company was in compliance with all financial covenants under the 2022 Credit Facility. As of March 31, 2024, the effective interest rate of the senior secured revolving credit facility was 7.32% and the senior secured term loan was 7.82%. As of December 31, 2023, the effective interest rate of the senior secured revolving credit facility was 7.64% and the effective rate of the senior secured term loan was 7.89%.

Other

In addition, the Company has outstanding notes payable for capital expenditures in the amount of $1,826 and $1,361 as of March 31, 2024 and December 31, 2023, respectively, with $345 and $163 included in the “Line of credit and current maturities of long-term debt” line item of the Company’s condensed consolidated financial statements as of March 31, 2024 and December 31, 2023, respectively. The notes payable have monthly payments that range from $3 to $20 and an interest rate of approximately 6%. The equipment purchased is utilized as collateral for the notes payable. The outstanding notes payable mature in September 2028.

NOTE 9 — LEASES

The Company leases certain facilities and equipment. The leases are accounted for under Accounting Standard Update 2016-02, Leases (“Topic 842”), and the Company elected to apply each available practical expedient. The discount rates used for the leases are based on an interest rate yield curve developed for the leases in the Company’s lease portfolio.

The Company has elected to apply the short-term lease exception to all leases of one year or less. During the three months ended March 31, 2024 and 2023, the Company did not have additional operating leases that resulted in right-of-use assets obtained in exchange for lease obligations. During the three months ended March 31, 2024 and 2023, the Company had additional finance leases associated with property, plant, and equipment of $813 and $0 respectively.

Some of the Company’s facility leases include options to renew. The exercise of the renewal options is typically at the Company’s discretion. The Company regularly evaluates the renewal options and includes them in the lease term when the Company is reasonably certain to exercise them.

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Quantitative information regarding the Company’s leases is as follows:

	*Three Months Ended March 31,*
	*2024*			*2023*
Components of lease cost
Finance lease cost components:
Amortization of finance lease assets	$	358		$	370
Interest on finance lease liabilities		107			98
Total finance lease costs		465			468
Operating lease cost components:
Operating lease cost		642			704
Short-term lease cost		46			89
Variable lease cost (1)		369			345
Sublease income		(50	)		(48	)
Total operating lease costs		1,007			1,090

SEC Form 10-Q filed by Broadwind Inc.